Definition of political economy
he study and use of how economic theory and methods influences political ideology. Political economy is the interplay between economics, law and politics, and how institutions develop in different social and economic systems, such as capitalism, socialism and communism. Political economy analyzes how public policy is created and implemented.
Political economy of international trade
Trade policy: Since World War 2, the main instrument of trade policy, tariffs, among advanced industrial countries have been reduced to insignificant levels. After the latest round of international trade negotiations, the Uruguay Round, completed
in 1994, the average tariff for the developed countries was reduced from 6.3%
to 3.8% . On the other hand, Non tariff barriers which include quantitative restrictions, price controls, subsidies, voluntary export restraints, etc have proliferated, in part making up for the decline in tariffs. But again the Uruguay Round slowed or reverse...
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... the past few decades, this type of argument seems very plausible. The abrupt rejection of ISI and protectionism by developing countries seems less explicable in these terms.
The question that I set out to address was why nations around the globe have
liberalized their trade policies since 1980. I examined the preeminent theories
of trade policy to see if they could help explain this monumental shift in policy.
In this section I assess how well they have done and where future research
might be useful.
Why have trade barriers been declining globally since 1980? Existing
theories suggest at least three plausible answers. It involves changing
preferences about trade policy among domestic actors. Clearly, in the 1980s,
many political leaders and some societal groups in countries around the globe changed their views on what their best trade policy choice was.
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